Senators Oppose Smithfield Deal

Iowa Leaders Aim To Protect Hog Farmers At Home

July 23, 2003|By CHRIS FLORES Daily Press

SMITHFIELD — One of Smithfield Foods' bitterest enemies stands between the world's largest hog farmer and pork producer and its $363.5 million acquisition of bankrupt Farmland Foods' pork business -- the state of Iowa.

Iowa farmers raise more hogs than any other state in the country and they fear Smithfield's growing control over hog prices. They say the company's clout will allow it to slaughter its own hogs when prices are high and buy from farmers when hog prices are low, driving independent hog farmers out of business.

And Iowa's farmers have strong allies in Iowa's senators -- Republican Charles Grassley and Democrat Tom Harkin -- who have urged federal antitrust authorities to reject the deal. The senators also are leading an effort to pass a federal law that would prohibit meatpackers like Smithfield from also owning and raising animals.

Smithfield won its last battle against Iowa lawmakers -- a lawsuit that challenged the constitutionality of a 25-year-old Iowa law that banned meatpackers from owning livestock in the state.

In January, a federal court agreed with Smithfield that the law was a restraint on interstate commerce. Other states have faced similar challenges to state laws, leading members of Congress to try to pass a bill banning meatpackers from animal ownership nationwide.

In 2002, Grassley and other Midwestern senators tried to include a ban in the farm bill.

It passed the Senate, but the provision was stripped away in conference under pressure from Smithfield and other meatpackers.

The bill was reintroduced this year by the same senators.

Independent farmer organizations in Iowa and the Midwest also are fighting the Smithfield deal and supporting the federal bill.

Bryce Oates, a spokesman for the Campaign for Family Farms, which fights meatpacker consolidation in the Midwest, said profits are shifting from family farms to large corporations.

"Consolidation in the meatpacking industry in the last 10 to 15 years has taken more of the consumer dollar from independent producers of hogs," said Oates.

A recent U.S. Agriculture Department study compared the prices that meatpackers pay to independent hog producers to the prices consumers pay for retail pork products, said Oates.

It showed that over the last decade, the hog farmer's share of every retail dollar dropped to 23 cents from 37 cents.

Over that period, consumer prices rose slightly more than the inflation rate and the meatpackers pocketed more of the total profits, said Oates.

Smithfield argues that federal antitrust regulators have approved deals in the chicken and beef industries that gave the top companies an even greater market share than the 27 percent Smithfield will have if its acquisition is approved.

The pork industry is different because Smithfield raises more of its own hogs, Oates said.

The poultry industry was never a major family farm business and has been vertically integrated since the 1960s.

Beef industry leader Tyson Foods doesn't raise many cattle because the process is not an industrial-type of environment like hog operations, he said.

Even if the Smithfield deal is approved, the company will continue to be faced with the pending congressional bills, which would force the company to sell its pork production capabilities back to independent farmers.

Iowa's politicians are in key positions to push the law and fight Smithfield's efforts.

Harkin is the ranking minority member of the Agriculture Committee. Grassley sits on the Judiciary and Agriculture committees and is chairman of the Finance Committee.

The Senate judiciary subcommittee that scrutinizes antitrust issues will have a hearing today to examine agricultural consolidation and the Farmland deal.

A Smithfield executive will be on hand to answer questions.

Chris Flores can be reached at 247-4738 or by e-mail at cflores@dailypress.com